Oil edges higher after Russia indicates larger output cut (UPDATE)

Brent oil futures edged higher on Friday after Russia seemed likely to contribute a bigger output cut to an OPEC and non-OPEC deal, but Saudi Arabia voiced pessimism on whether an agreement could be reached as Iran insisted on an exemption.

International Brent crude oil futures LCOc1 fell below $60 per barrel in early trade, but firmed to $60.17 a barrel by 1041 GMT, up 11 cents from the close. U.S. West Texas Intermediate (WTI) crude futures CLc1 were down 18 cents at $51.3 per barrel.

The slight recovery came after crude slumped by almost 3 percent the previous day, with the Organization of the Petroleum Exporting Countries (OPEC) ending a meeting at its headquarters in Vienna, Austria, on Thursday without announcing a decision to cut crude supply.

Iran appeared on Friday to be the main obstacle for an OPEC deal to cut oil production, as the group’s leader Saudi Arabia had yet to agree exemptions for sanctions-hit Tehran, two OPEC sources said.

Saudi Energy Minister Khalid al-Falih said he was not confident a deal could be reached.

OPEC also wants to get Russia on board with cuts. Russian energy minister Alexander Novak returned to Vienna on Friday after discussing OPEC with Russian President Vladimir Putin in Moscow.

Novak said on Friday Russia would seek an agreement with OPEC and non-OPEC producers and a Russian Energy Ministry source said Moscow was ready to contribute a cut of around 200,000 bpd, up from the initial 150,000 bpd previously floated.

OPEC delegates have been pushing for Moscow to cut around 250,000 bpd.

Analysts noted a big cut would be needed to reverse recent price falls and Russia’s volume was key to this.

“Reversing the overwhelmingly bearish price sentiment will likely require a credible and cohesive message from the OPEC meeting,” U.S. investment bank Jefferies said on Friday.

“Even a 1 million bpd cut could lead to a ‘sell the news’ reaction in the short term,” Jefferies added. “If no agreement is reached, oil prices have significant downside.”

SUPPLY SURGE, PRICE PLUNGE

Oil producers have been hit by a 30 percent plunge in crude prices since October, as supply surges just as the demand outlook weakens amid a global economic slowdown.

Oil output from the world’s biggest producers – OPEC, Russia and the United States – has increased by 3.3 million bpd since the end of 2017 to 56.38 million bpd, meeting almost 60 percent of global consumption.

That increase alone is equivalent to the output of major OPEC producer the United Arab Emirates.

The surge is largely down to soaring U.S. crude oil production, which has jumped by 2.5 million bpd since early 2016 to a record 11.7 million bpd, making the United States the world’s biggest oil producer.

As a result, the United States last week exported more crude oil and fuel than it imported for the first time in records going back to 1973, according to data released on Thursday.